TV vs. the Internet: Who Will Win?

Amazon Studios
Jeffrey Tambor as the transgender character Maura in Transparent, an Amazon Original series that can be watched only on the Internet


Between 1999 and 2009, annual revenues in the music industry declined from $14.6 billion to $6.3 billion, according to the market analysis firm Forrester Research. The music business was first attacked from below by illegal file sharing on Napster and subsequently from above by Apple’s iTunes, which unbundled fourteen-dollar CDs into ninety-nine-cent songs. Even as user habits have shifted again, away from owning digital audio files such as MP3s and toward renting music from streaming services like Spotify and Pandora, recording industry revenues have remained flat, below the level where they were in the 1970s.

Newspapers followed a similar pattern, sustaining a much greater destruction of value in a shorter period of time. From 2006 to 2012, revenues fell from $49.3 billion to $22.3 billion, according to trade association figures. The challengers from below included Craigslist, which turned the multibillion-dollar print classified business into a multimillion-dollar online business. Google diverted other advertising dollars while online news sapped print circulation.

These disruptions left the question of when the television business would face its turn on the dissecting table. But despite sharing the vulnerabilities of other long-standing media—shrinking audiences, changing consumption patterns, new competition for ad dollars—the television dinosaur has only grown fatter. According to the research firm SNL Kagan, cable TV revenues rose from $36 billion in 2000 to $93 billion in 2010. Profits of the giant conglomerates—ABC/Disney, NBC Universal, Fox, Viacom, and CBS—have continued to climb in the years since. Cable operators thrive despite antiquated technology, extreme customer dissatisfaction, and the challenge of Internet streaming services like Netflix and Amazon, which now create their own original content as well. Even local broadcast stations remain highly profitable despite the declining audiences for their core news product, thanks in part to a surge of political spending following the Citizens United decision in 2010.

How the television business has eluded the bitter fate of other media is the subject of Michael Wolff’s new book, Television Is the New Television. “For sixty years, television, given massive generational, behavioral, and technological shifts, has managed to change…not so much,” he writes. To Wolff, the industry’s imperviousness to digital disruption counts as nothing short of heroic. In an assemblage of digressive riffs, he praises television’s stodginess in defense of profits. This stands in contrast to newspapers and magazines, which he derides for embracing digital transformation in ways that have only accelerated their decline. For example, he criticizes The New York Times for relinquishing its attachment to a print edition that still provides nearly 80 percent of its revenue in favor of the much smaller, “profitless space” online.

Wolff contends that television learned a useful lesson from the gutting of the music industry. The record companies were at first lackadaisical in protecting their intellectual property, then went after their own customers, filing lawsuits against dorm-room downloaders. Under the Digital Millennium Copyright Act, passed in 1998, sites hosting videos such as YouTube appeared to be within their rights to wait for takedown notices before removing pirated material. But Viacom, led by the octogenarian Sumner Redstone, sued YouTube anyway. Its 2007 lawsuit forced Google, which had bought YouTube the previous year, to abandon copyright infringement as a business model. Thanks to the challenge from Viacom, YouTube became a venue for low-value content generated by users (“Charlie Bit My Finger”) and acceded to paying media owners, such as Comedy Central, a share of its advertising revenue in exchange for its use of material. “Instead of a common carrier they had become, in a major transformation, licensors,” Wolff writes. Where it might have been subsumed by a new distribution model, the television business instead subsumed its disruptor.

Wolff is dismissive of newer threats to the business. He regards cord cutting—customers dropping premium cable bundles in favor of Internet services such as Netflix—as an insignificant phenomenon. But even if it gathers steam, as recent evidence suggests may be happening, cord cutting leaves Comcast and Time Warner Cable, the largest cable companies, in a win-win position, since they provide the fiber optic cables that deliver broadband Internet to the home as well as those that bring TV. Even if you decide not to pay for hundreds of channels you don’t watch, you’ll pay the same monopoly to stream House of Cards. (This won’t provide much comfort, however, to companies that own the shows, which stand to lose revenue from both cable subscribers and commercials priced according to ratings.)

For Wolff, the resilience of the TV business finds its embodiment in Les Moonves, whom he describes as the “self-satisfied, overpaid” CEO of CBS, “with his singular passion and talent for old-fashioned American television.” In 2005, Viacom spun off its less desirable assets, including CBS and its storied news division, and handed them to Moonves to deal with. A decade later, CBS is worth more than the rest of Viacom combined, including MTV, VH1, and Nickelodeon. Moonves accomplished this through skillful negotiations with the cable operators, whom he realized couldn’t very well offer their customers channel packages that didn’t include CBS local stations. In 2013, Moonves demanded dramatically larger retransmission fees from Time Warner Cable and made his stations unavailable to Time Warner when he didn’t get them. After a month without CBS, TWC capitulated.

Thanks to these “retrans” fees, you pay eight dollars a month for ESPN whether you watch sports or not. It’s not the cable operators who are denying consumers the à la carte option many would prefer. It’s the big five television companies who refuse to parcel out their offerings—(1) ABC/Disney, which owns ESPN, A&E, and Lifetime; (2) NBC Universal, which owns USA, Bravo, and the Weather Channel; (3) Fox, which owns Fox Sports, F/X, and National Geographic; (4) Viacom, which owns Comedy Central, BET, and MTV; and (5) CBS, which owns Showtime, the Movie Channel, and the CW. For these companies, the indirect charges they receive for their content have become the pot of gold at the end of the advertising rainbow.

The positive aspect to this consumer-unfriendly economic model may be better television. Most commercials are directed at young people, based on the advertising industry’s belief in establishing brand loyalty early. That’s why so much ad-supported programming caters to the tastes of teenagers. Adults, however, pay cable bills, and this fosters the kind of long-arc narratives and complicated antiheroes that appeal to more mature audiences. Wolff argues that the economics of pay TV have driven the emergence of “storytelling on a riveting, epic, how-we-live-now scale: the baby boom trying to understand itself and the world it had wrought.”

There is indeed some wonderful stuff on TV these days, but prestige programs like Mad Men and Breaking Bad may owe more to obscure cable channels trying to distinguish themselves in a vast marketplace than to the third-party payer system embedded in the mumbo-jumbo of cable bills. The independent cable channel AMC continues to depend on advertising, and its competitors like Bravo, A&E, History, and Lifetime make their money from the advertising revenue of prime-time lineups of tawdry reality shows. Wolff idealizes the new television in a way that suggests he hasn’t spent much time watching Duck Dynasty. He doesn’t appear to be all that interested in what’s actually on TV. His broad embrace of it serves a different purpose: as a cudgel to attack the digital media that have been getting much attention. Wolff devotes a lot of his book to smacking the latest generation of digital media companies: BuzzFeed (a “staff of engineers able to game the social media world”); the Forbes website (“a shell game, in which, through a series of ever-developing stratagems, random eyeballs…were tricked or promoted into coming to the site”); and Vice (“so bizarre is the notion that Vice’s young male audience will watch international news that puzzled media minds can only seem to conclude it must be true”).

To Wolff, good old-fashioned television delivers something that these social optimizers, clickbaiters, and video clip-jobbers can’t, which is to keep audiences immersed in stories with a beginning, middle, and end. The economic reason for this, he asserts, is digital overabundance. On the Web, any given page can be seen many times so there are countless opportunities to advertise. This inexorably drives CPMs—cost per thousand page views, the unit by which advertising prices are typically measured—below the level that can support the creation of high-quality content in any form.

Some of Wolff’s judgments about digital trends hit their mark. But his analysis is too categorical and in places simply wrong. As younger audiences shift from television to digital consumption of media, advertising dollars are following them. Prices for desirable ad placements on the Web remain high, even as the value of generic traffic on most websites goes down. In the end, Wolff’s hostility toward digital media leads him to overstate both TV’s immunity to disruption and his case that, because of the law of supply and demand, nothing of value can ever become a real business online.


You can’t understand Wolff’s scorn for new media without reading Burn Rate (1998), the entertaining, self-lacerating account of his first foray as a digital entrepreneur. In the earliest days of the Internet, Wolff had the insight that people would need to know what sites were worth visiting, and he began publishing books and online reviews to guide them. Your Personal Network, as his site was called, was soon swept away by web portals like AOL and Yahoo that provided e-mail, news, and search engines all on a single site.

But before that happened, Wolff nearly became rich, nearly went bankrupt, and finally walked away disillusioned both with the Internet and with many of those trying to build a business around it. In that book, Wolff depicts himself as both a visionary and a charlatan, ready to cheat and deceive in the attempt to cash out of his ticking time bomb of a start-up before it blows. “How many fairly grievous lies had I told?” he asks himself. “How many moral lapses had I committed? How many ethical breaches had I fallen into?” The justification for his bad behavior is implicitly that, hey, other people were even worse. If Wolff remains hyper-vigilant about new media con artists, his own confessions should be kept in mind.

At the conclusion of Burn Rate, Wolff declares himself sick of the Internet racket and ready to go back to the honest business of journalism. He turned his hand to writing a column for New York magazine, then for Vanity Fair and a variety of other publications before arriving at his unlikely present home, USA Today. By the time of Autumn of the Moguls (2003), a book derived from his New York columns, Wolff has turned as cynical about the old media world as he was about the Internet. Now it is the “titans, poseurs, and money guys” of his subtitle, surveyed with a gimlet eye from his table at Michael’s, who can’t possibly get away with it much longer. The media business, Wolff declares, is collapsing because of inflated salaries, bloated egos, and dumb ideas. In view of his liberal politics, it is curious that the one mogul who wins his admiration is Rupert Murdoch, whom he praises for the purity of his ruthlessness. This relatively flattering portrayal might have helped to provide the entrée Wolff required for his next book, The Man Who Owns the News (2008), a biography with which Murdoch, his lieutenants, and all of his family inexplicably cooperated.

Comedy Central
Stephen Colbert, who has just taken over The Late Show on the CBS television network, on his earlier Comedy Central television show, The Colbert Report

As a media writer, Wolff specializes in sizing people up and cutting them down. An hour spent with Alan Rusbridger, the former editor of The Guardian, he writes in British GQ, is “unpleasant in the exertions required to penetrate his lack of transparency.” The secret of Tina Brown’s career is “failing upward.” Even among “semi-retarded” newspaper business reporters, the late David Carr was “quite a nitwit.” Contempt expressed so promiscuously has a tendency to lose potency. But if Wolff the columnist is consistently mean, he is seldom dull, often writing what others inside the New York media bubble think about each other but would only say in private.

In recent years, Wolff has continued to ricochet back and forth between old media curmudgeon and new media visionary. In 2007, he founded a site called Newser, whose goal, he declared in an interview at the time, was to replace the network news. This was a grandiose notion for an undercapitalized would-be competitor to the The Huffington Post, which did little more than rework stories found elsewhere and crown them with punchier headlines. Go to Newser, whose motto is “Read less. Know More,” and you’ll find a collection of editorial content in a form adapted to generate Facebook traffic: “Set Foot On This Island And You May Not Leave Alive” and “Super 5-Year-Olds: 5 Great Things This Week.”

According to the site, “Michael Wolff is the founder of Newser and guides its overall direction.” The experience of launching and running a second digital content startup goes unmentioned, however, in his new book, perhaps because Newser embodies the kind of bottom-feeding clickbait that the author of Television Is the New Television dismisses as “lower-end junk.” While he ignores the awfulness of most television programming, Wolff offers no respect to even the better digital-first destinations—Vox, Vulture, 538, The Atavist, The Awl, Quartz, Slate, Salon, Tablet, Politico Magazine, The Onion, Funny or Die, and—on their better days—BuzzFeed, The Huffington Post, Business Insider, Gawker, and Vice. As businesses, these free sites are challenged by heavy dependence on advertising, but they produce a great deal of original, high-quality content.1 May the real sin of some of these outlets be that they’ve found traction that eluded Your Personal Network and Newser?

Like the venture capitalists currently pumping investments into the new startups, Wolff can be counted on to reverse his biases every few years or so: content is king; content is a dismal commodity; content is king again. The chief difference is that he is on a countercycle, endorsing old models when others embrace disruption and vice versa. Wolff has the right to change his mind, of course, and it is hard to think of any media sage who has been either consistent or correct over the past two decades. But at some point his blanket assertions, unsupported by evidence and animated by the conviction that anyone who thinks what he thought not very long ago must be weak-minded, begin to lose their charm.


Whatever he believed ten years ago, is Wolff right that it’s now springtime for the old television machers? To answer that question, it’s necessary to step back from his latest embrace of the pre-digital in favor of more evidence-based analysis. An excellent place to start is Alan Wolk’s self-published book Over the Top: How the Internet Is (Slowly but Surely) Changing the Television Industry. Wolk, a well-connected industry analyst, points to a very different future for the television business than the one Wolff depicts. Wolk thinks that the sector is poised for major disruption, even if it’s unclear from which side or how quickly the transformation is likely to come.

In an industry where all the big players are still making loads of money, Wolk explains, no one has an interest in upsetting the apple cart. But that hardly makes the current disposition secure. If “the world still sits in front of a television,” as Wolff asserts, that becomes less true with the passing of every measured month. Time-shifted viewing (recording programs so you can see them when you want) and streaming video (watching video on the Internet) mean that conventional television audiences are shrinking fast, except for live sports and news events like the Fox News Republican debate.

For the June–July period, the top thirty cable networks were down more than 10 percent in prime-time viewers compared to a year earlier, according to Nielsen. Viewership in the eighteen-to-forty-nine category, which advertisers care about most, fell 20 percent.2 The audience for live TV appears to be contracting to a smaller base of passive, older viewers. Most worrisome from a financial perspective is that television is reaching fewer fifteen-to-thirty-five-year-olds, who spend more time engaging with social media on smartphones than staring at freestanding screens. The promise of access to this generation of consumers explains recent investments in the new outlets Wolff regards as valueless, including ABC’s stake in Fusion, NBC Universal’s interest in BuzzFeed and Vox, and nearly everyone’s investments in Vice.

When it comes to advertising revenues, declining audiences have so far had an ambiguous impact, sometimes driving up advertising prices for demographic segments that are becoming harder to reach, like children. But this is a melting iceberg model: shrinking real estate may drive prices higher, but at some point, there’s not much ground left to stand on. The total volume of “upfront” sales, in which networks command their highest prices for advertising sponsorships on prime-time programs, has been declining along with the reach of live television. What’s more, as audiences migrate away from live television, Netflix and Amazon are training viewers to expect entertainment without the interruption of ads.

What used to be television advertising dollars continue to migrate toward several different kinds of ads, whether online video, mobile, search, or digital display advertising. According to a forecast by the Forrester research firm, spending on digital advertising will surpass spending on television advertising in 2016. For television companies, retransmission fees may pick up more of the slack, but recent media company earnings reports indicate that those fees, and the ability of cable companies to pass them along to consumers, may have hit a ceiling. Smaller cable systems have recently been holding out against price increases demanded by Viacom and others as cable subscription numbers fall.

Today, digital content hubs like YouTube, AOL, and Yahoo that deliver the largest audiences, as well as premium sites like The New York Times, can demand high prices for ads. They do so especially for “native” ads, i.e., ads similar in form to the surrounding editorial content, and for those that run just before short-form video. Conversely, the future of television may come to look more like digital, with more and more advertising sold “programmatically,” meaning that it targets specific audiences across multiple networks rather than buying on the basis of guaranteed ratings of individual shows. This shift brings the risk for the big five not only of lower prices per thousands of viewers. It also heightens the risk that more of the value of the advertising will be raked off by “ad-tech” intermediaries that target, track, and verify that commercials have been viewed by their intended audiences.

Never underestimate the durability of a monopoly, but the cable companies, with their anachronistic two-thousand- channel grids and 1990s-era set-top boxes, face real vulnerabilities as well. Here the disruption might come through an alternative way of receiving high-speed Internet, such as national or municipal Wi-Fi networks that would transmit the same materials now delivered by cable. Alternatively, the government could force the cable companies to open, for use by competitors, the “last mile” of wiring that brings high-speed Internet into the home. The 1982 breakup of AT&T’s “natural monopoly” on phone service provides a precedent here. A legislative fight on this issue would pit unlovable Comcast and Time Warner Cable against GAFA—Google, Apple, Facebook, and Amazon. The gafa companies would like to be able to sell pay TV through cables of their own. Or, before any of that happens, the balance of power in the industry may simply shift more dramatically to the GAFA companies, whose long-rumored entry into the TV market is already taking place in the form of original shows available only online, such as the Amazon series Transparent. These tech companies also have the financial resources to compete for exclusive rights to stream live sports events, another shift that could sound the death knell of live TV.

Wolk’s book is also more interesting than Wolff’s about the way media economics is changing the shape of filmed content. The all-at-once release model, which Netflix pioneered with the Norwegian-American crime comedy Lilyhammer in 2012, was the experiment that immediately expanded the market for television auteurs. When a twenty-two-episode season was shown over six months, writers could introduce or kill off characters and plot lines in response to audience reactions. Now writers must rely mainly on their own instincts to deliver a finished season designed for binge viewing. This is another factor making scripted TV more novelistic.

Do these evolving patterns of content distribution and consumption represent disruption or persistence? Wolff’s bias against new media leads him into tautology: that which succeeds demonstrates the durability of television. That which fails to earn immediate profits exposes the shell game of digital media. It’s true that someone binge-watching a bulk-released season of Orange Is the New Black on a Wi-Fi-connected laptop is in some recognizable sense watching TV, just as a person reading The Washington Post via Facebook on his or her iPhone is reading the newspaper. But it’s hard to accept Michael Wolff’s view that the former represents the triumph of the old and the latter foolish acquiescence to the new.

  1. 1

    For a contrary point of view, see Michael Massing, “Digital Journalism: How Good Is It?” and “Digital Journalism: The Next Generation,” The New York Review, June 4 and June 25, 2015. I should declare my own interest as chairman and editor in chief of the Slate Group. 

  2. 2

    “Cord-Cutting Weighs on Pay TV,” The Wall Street Journal, August 6, 2015.